In a recent Wall Street Journal article, “The Struggling Colleges Raiding Their Endowments to Pay the Bills,” Philanthropy Roundtable’s Adam Meyerson Distinguished Fellow in Philanthropic Excellence Joanne Florino addresses a growing concern for higher-education donors: the pressure colleges face to dip into restricted endowment funds.
As a leading expert on donor intent and author of “Top Ten Tips for Higher Education Funders,” Florino emphasizes the fundamental legal and moral obligations attached to restricted charitable gifts. When colleges and universities face financial hardship, the temptation to tap restricted funds grows, along with the risks of violating donor intent and undermining donors’ trust.
Florino is also the author of “Donor Intent Watch,” a monthly series covering donor intent developments and controversies nationwide. The Roundtable played a key role in advancing the Safeguarding Endowment Gifts Act, which has now passed in Georgia, Kansas, Kentucky and Montana, with efforts to expand the legislation continuing in 2027.
Below are excerpts from “The Struggling Colleges Raiding Their Endowments to Pay the Bills”:
“Higher education is in real financial trouble, and Strouse’s lost scholarship is one piece of the growing collateral damage. College leaders are cutting programs, laying off faculty—and digging into endowments to pay operating expenses. Boards of trustees are under intense pressure and some are turning on one another and the presidents they employ. In extreme cases, schools are covering day-to-day bills with funds that donors gifted for other purposes, without the donors’ knowledge or consent.”
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“‘This is going to be a huge problem as small colleges close,’ said Joanne Florino, a fellow at Philanthropy Roundtable, a nonprofit organization that advocates on behalf of philanthropists. “A lot of living donors are finding out the money they donated is not being used for what they gave it for.’
“Kansas, Kentucky, Georgia and Montana have passed legislation in the past few years making it easier for donors to take legal action against nonprofit organizations, including colleges, that use restricted gifts outside the intended terms. The Roundtable pushed for the legislation amid growing concerns about the possibility of misuse, said Florino. More than 440 colleges are at risk of closing or merging in the next decade, according to a forecast by the Huron Consulting Group, which advises schools on operations and mergers.”
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“Donations to colleges fall into two buckets: those for general use and those restricted to a specific purpose by the benefactor. Generally, schools can only change how a restricted gift is spent by asking permission—from the donor if still alive, or from the attorney general or the courts if the donor has died. Trustees are the institution’s fiduciaries and it is their responsibility to see that restricted funds are spent appropriately, said Ben Porter, founder of Principal Gift Strategies, a fundraising consultancy.
“Florino, of the Philanthropy Roundtable, said when schools spend money from restricted endowments they’re often playing a losing hand and can’t stop themselves from gambling their last few dollars. ‘It’s like the guy who’s going broke and decides he’s going to take his last $1,000 and go to the racetrack,’ she said, ‘because he believes he’s going to win and then he can make everything better.’”
Continue reading at The Wall Street Journal.
